Last summer I wrote about Arianna Huffington’s latest book, Third World America: How Our Politicians are Abandoning the Middle Class and Betraying the American Dream and talked about the Great Recession, the Great Bailout, and the Great Cover-Up of financial crimes.

I also wrote that municipal financial problems spelled a lower quality of life. Downtown Chicago crime escalated, along with attacks on officers in the Chicago Police Department. An officer who spoke up about the low morale of the undermanned and rudderless police force endured official retaliation. (“Third World America: ‘Fast Tracking to Anarchy“)

This year, all hell has broken loose in downtown Chicago. Years of under-hiring have resulted in a police force that is unprepared for wildings and gang violence. Moreover, concealed carry in Chicago is illegal, unless one follows the Constitution.

Tourists and residents have been attacked by mobs of youths on buses, on beaches, on bicycle paths, near the shops of the Magnificent Mile, and outside their homes. Mobs of shoplifters plagued “Mug Mile” stores. The irony is that these disenfranchised youths are turning to crime — and if justice is done, prison sentences –a gainst innocent targets. Their focus is misdirected. Participating in a peaceful five million man march — a true show of force and power — against elected culprits in Washington would get them better results for lasting change.

The Spring of Anarchy: “A City At War With Itself”

It is still technically spring in Chicago, and wildings have made Chicago and its beaches unsafe. Poorer neighborhoods have long been war zones. The murder rate and gang violence in Chicago has been unacceptable for years.

Of course, we want police officers to follow proper procedures at all times, but we also want them to make fast decisions in violent chaotic circumstances, defend themselves, and get home safely to their families and friends. Local media hounds come out in force against police work. It’s time they came out in favor of superior training and hiring.

Mayor Rahm Emanuel, with less than a month in office, has called for the arrest of all the youths involved in last weekend’s mob attack that included an attack on a shopper and on two middle-aged doctors — in separate incidents — visiting for an oncology convention. Yet there have been ongoing incidents of wildings that didn’t make the front page of local papers as did this last attack on tourists.

The woefully undermanned police force plans to recruit and train 300 new officers when some estimates indicated it needed more than 3,000 new officers before the outbreak of the new-pattern crime wave.

Acting Police Superintendent has to Stop Lying to Citizens

Mainstream media has finally started to report crime in the more fashionable parts of town, but only because it has spun out of control into anarchy. The most reliable source of crime-wave information has been Second City Cop, a blog started by a member of the Chicago police force.

Based on my conversations with friends and neighbors, citizens of Chicago feel lied-to by Acting Police Superintendent Garry McCarthy. On Memorial Day, North Avenue beach, in one of Chicago’s more affluent areas, was closed after gang violence. This is unprecedented. McCarthy repeatedly told the media it was due to people succumbing to the hot weather. Not true. Violence was out of control as beach-goers were harassed by mobs and cyclists were pulled off their bikes and beaten.

Mainstream media now contradicts McCarthy’s feeble spin. One police officer told the media that 500 youths exited public transportation for the lakefront and while they were there, citizens were harassed.

CBS reported wilding incidents at this beach earlier in May, and police patrols had already been stepped-up. Two bike riders on the North Avenue Beach path had been mobbed by about 100 teens. They were knocked off their bikes and then thrown into Lake Michigan. Yet Near North District commander Kenneth Angarone said police responding at the scene did not find a “bona fide incident.”

Mobs have swarmed local businesses, shoplifted and intimidated shoppers at high-end stores, attacked bus riders, attacked shoppers near Michigan Avenue, attacked tourists and more. Shortly after Mayor Rahm Emanuel said he would round up perpetrators of last week’s mob attack, NBC reported that a mob of 15 to 20 youths beat and robbed two people in Chicago’s downtown shopping area.

In response to the weekend violence, my network of friends emailed around news articles. Mary McCarthy, a friend of a friend, emailed local papers about a mob pulling people from cars and taxis right outside her upscale apartment building. When the police arrived 15 minutes later, the crowd had scattered. Here’s an excerpt:

At about 11pm last Friday night, June 3rd, I heard shouting, screaming, horns blaring and tires screeching from my apartment…When I looked out my window to the street below I saw a crowd of about 20 young people…directly across the street from the entrance to my building. They were leaning on parked cars and clogging the street. They were screaming at people walking and driving by. I watched them stop vehicles, including taxi cabs, and pull people from the vehicles…It was a frightening scene and I was sure someone was going to be hurt.

The Sun-Times wrote of Mary McCarthy’s report and Police Near North District commander Kenneth Angarone said that police responded but did not find a “bona fide incident.” I believe Ms. McCarthy.

It’s Not a Race War; It’s a Class War

It’s much too easy to let politicians divide the nation, make this about race, and ignore the underlying causes. It’s true that many of the mobs in downtown Chicago are comprised of African Americans, but Oprah Winfrey isn’t into wilding. Mary McCarthy didn’t get a close up look at the mob outside her window, but they appeared white — definitely not African American.

Last year, I never mentioned race in my post about Chicago violence, but a few commenters brought up race and made unwarranted assumptions. Some commenters assumed “wildings” only involve black youths. Chicago is a city with a lot of diversity and gangs of every race. I mentioned a separate incident of an armed intruder being shot and killed by an off duty police officer; the armed intruder was not African American. I also mentioned three police officers were shot and killed within a two month period. Two were African American, one was not.

U.S. Downward Mobility

The destruction of the middle class has accelerated. Housing values have plummeted, and investors earn negative real rates of inflation adjusted returns on “safe” investments like money market funds. Food, fuel, and medical costs have skyrocketed. Essential civil services are underfunded while taxes escalate. The middle class is sinking fast as saved wealth is destroyed and its standard of living erodes.

After being subjected to a national financial crime wave with no meaningful consequences for white collar criminals, the middle class, the core of many cities and communities, is being subjected to a physical crime wave.

The U.S. escalated its debt to fund the ongoing bailout of the banking system. TARP was a small part of it. The Fed now owns over a trillion in suspect assets it bought from banks, and it daily provides them with almost zero cost money so high spreads help them earn their way out of the financial hole in their balance sheets. No one went to jail, and bankers reward themselves with billions in bonuses.

Banks broke their TARP agreement to lend to small and medium sized businesses. They lent to large businesses that outsource a lot of labor. The iPads stolen by Chicago gangs are mostly made in Asia. Banks and their enablers in Washington starved the U.S. of the biggest source of sustainable job growth: capital investment in the United States.

Elected Citizen-on-Taxpayer Financial Crime

Illinois and Chicago are ground zero for the consequences of our local and national fiscal folly. Pension funds are woefully underfunded. Last minute sweetheart deals to crony-connected retirees have contributed to the problem along with bad investment decisions. In general, though, civil servants are blameless. Some are being asked to increase contributions from 8 percent of pay to 12 percent of pay. The State of Illinois is behind on many of its bills. Chicago’s city budget is in dire straits.

The suburb of Bellwood provides an example of how graft and corruption have contributed to municipal project debt. A train station project was hijacked by local officials who paid millions above appraisals for properties, and in at least one instance dealt with a mob-linked company. According to the Chicago Tribune, taxpayers of the small suburb have a $40 million hole and investigations revealed “questionable players,” with laughable financial analysis.

Chicago’s unemployment rate and mortgage delinquency rates are among the highest in the country, and home prices have slumped to 10-year lows. The S&P Case -Shiller index shows that Chicago area housing prices have fallen to April 2001 levels. From the housing bubble’s November 2006 peak, prices are off 34 percent.

Illinois state income taxes rose this year from 3 percent to 5 percent, a 66.7 percent increase. That is in addition to sales taxes, utility taxes, phone taxes, various automobile taxes.

Chicago is not alone. Cities throughout the country recently experienced wildings, and it will get worse for them as it did for Chicago. Illinois may have the most severe budget crisis in the country, but states like California, New York, New Jersey and more are troubled.

Ongoing Mugging by Wall Street Banks

After the largest bank bailout in world history, we now have a national epidemic of foreclosure fraud. In March, Judge Moshe Jacobius stayed 1,700 foreclosures due to altered documents in Illinois’ Cook County.

A complaint of alleged fraud on the part of Goldman Sachs detailed its close relationships with Countrywide, New Century, and Fremont. The complaint showed Goldman knew of “an accelerating meltdown for subprime lenders such as New Century and Fremont.” Despite known serious loan problems, Goldman continued to securitize the loans and sell them in packages of residential mortgage backed securities. Goldman Sachs Alternative Mortgage Products (GSAMP) was “garbage sold at mythical prices.”

The complaint alleged that Countrywide employees in a Chicago office inflated incomes on 90 percent of reduced documentation loans, also known as “liars’ loans.” One of Countrywide’s mortgage brokerage arms “routinely doubled the amount of the potential borrower’s income … so that borrowers could qualify for loans they could not afford.” The complaint alleged that brokers, not borrowers, engaged in massive fraud to push loans through the system and earn commissions. Illinois Attorney General Lisa Madigan told First Business Morning News: “Countrywide broke the law, homeowners did not.”

“Every day, Americans, faced with layoffs and tough economic times, are forced to use their credit cards to pay for essentials such as food, housing, and medical care — the costs of which continue to escalate. But, as their debt rises, they find it harder to keep up with their payments. When they don’t, banks, trying to offset losses in other areas, turn around, hike interest rates, and impose all manner of fees and penalties.” Third World America, P. 77.

Even when banks initiated foreclosure fraud, they refuse to bear the costs of delays and bad deals of their own making. After pumping up appraisals and falsifying borrowers’ income on applications, banks are walking away from abandoned homes and sticking taxpayers with the bill to clean up the mess they left behind.

Banks claim that it is mortgage lenders or mortgage servicers who are guilty, but these are bank affiliates and business partners funded by the banks.

Banks supplied the money (via private label phony securitizations) that fueled this problem. Banks engaged in widespread massive mortgage securitization fraud. As underwriters, banks were responsible for doing adequate due diligence on the underlying loans. Banks were responsible for making sure the representations about risk in their financial products were accurate. Instead, the representations were materially misleading.

According to a local study by the Woodstock Institute, the mortgage servicers and trustees most often associated with abandoned properties are Bank of America, Wells Fargo, U.S. Bank, Deutsche Bank, and JPMorgan Chase.

We Need the Mother of All Reforms

Doing nothing ensures a relentless downward slide into financial and social chaos for great swaths of the country. Washington’s political corruption and mismanagement has the same roots as Chicago’s. As Arianna points out, on a national level, we need “the mother of all reforms:

“That is why the first step toward stopping our relentless transformation into Third World America has to be breaking the choke hold that special interest money has on our politicians.” (Third World America, 172)

Money isn’t the only way to sway politicians. One can take away the power politicians try to buy with that money. Among voters, a show of numbers is as effective as money. The middle class needs to make its voice heard in the media and in direct contact with their local and national elected officials.

On a national level, we need a Constitutional amendment requiring full public financing for political campaigns (for starters). Too many politicians are owned by special interest groups that buy votes, finance campaigns, employ their relatives, or just buy them off. As Arianna explained: “If someone’s going to own the politicians, it might as well be the American people.”